Real Estate Trust Management:
Single Or Multiple Trust Accounts?
Real estate trusts exist to allow client funds to be gathered up front and then distributed to certain expenses during the sale. Because it is unprofessional, not to mention illegal, to pay one client's costs with another client's money, you might wonder if it is necessary to open a separate bank account for each client. You already know HUD settlement statement software simplifies your real estate transactions so you shouldn't be surprised that the right financial software makes the same difference in trust management.
Myths About Real Estate Trusts
Two common reasons are given for using multiple trusts: reconciliation and statements.
How, these practices wonder, are our bookkeepers supposed to track transactions for hundreds of different clients in a single account? Trust fund mismanagement is a serious offense so businesses feel it is better to keep all the money separate just in case. In the days of paper accounting that might have been true, but modern escrow software allows you the best of both worlds. Transactions are marked by matter so you can view each client's trust transactions as though it were a separate account without the expense and headache of multi-account administration.
Real estate professionals also worry about generating financial statements. Clients want account statements but you don't want to send a record of every transaction in and out of the central trust account. Not only is that confusing but it's a violation of the privacy of your other clients. Dedicated trust software allows you to print statements that isolate each client account. Client statements will contain information only on their transactions and balances, and no information on other funds in the account. Meanwhile your bookkeepers can get overall statements that show all transactions.
Advantages Of Single Trust Accounts
Real estate accounting software removes the negative aspects of running a single trust account so you are left with only the benefits. Reconciliations can be generated for an individual purchase or sale, for a client including all properties that client has bought or sold, or for the entire escrow account. You can generate the three-way reconciliations required by many states and produce a paper trail detailed enough to keep any auditor happy. You don't have to spend the time to open and close new accounts every time a new client comes along.
Single trusts save money indirectly by saving you time. They also save you money by reducing your banking expenses. If your bank charges a monthly fee on each account, then you would have to pay that amount on each individual account opened. By having only one account you pay only one monthly fee. In addition, since your average balance in a single account is going to be higher you are less likely to incur additional fees based on low balance.
The computerized real estate firm is more flexible than practices still using outdated techniques. You shouldn't be filling out the HUD 1 settlement statement by hand and you shouldn't be managing trusts with anything other than dedicated trust software. Contact Easysoft to find out more about how our law practice management software save your practice time and money.